LLC Business Loans and How to Apply

A limited liability company (LLC) is one of the simplest and most common business structures for small-business owners and entrepreneurs. An LLC designates the business as a separate legal entity, meaning that the owner or owners (also known as members) can’t be held personally responsible for business debts or liabilities.

Although an LLC can be made up of one person, it’s not the same as a sole proprietorship because of this limited liability. An LLC can also have an unlimited number of members, though regulations vary from state to state. Almost all businesses can be established as LLCs.

It does cost more to file to establish an LLC, but if you’re starting a business, creating an LLC is a fairly simple way to keep your finances separate, gain tax advantages, and qualify for small business loans. Make sure to check what your state’s regulations are before filing.

The process varies from state to state, but typically, you’ll need a few things on hand to create an LLC.

• An official company name—Be sure to include some form of “LLC” or “Limited Company” in your business name.
• A physical address—This can be your home address or an office location where you primarily do your business and can receive mail
• Statement of purpose—This gives the state an idea of what to expect from your company. If you file as a clothing retailer and end up selling baked goods, you might have some complications.
• Registration fee—Depending on where you live, this cost could be anywhere from $50 to $150, as well as a smaller annual fee to keep your business registered.

With this information, most states allow you to file an LLC in person or online. In fact, it might only take you a few minutes to become an officially registered company and become eligible for small business loans.

Like other small businesses, an LLC can receive a business line of credit from either a traditional bank or an online lender. Rather than receiving a lump sum of cash, this option provides a spending limit, giving you more flexibility for borrowing and repayment. Interest rates can be high, but you only pay interest on the money you withdraw.

If your LLC deals with other businesses, another way to receive loan capital is through invoice factoring. This process involves selling your unpaid invoices to a factoring company, then paying them back with interest. The factoring company will collect unpaid invoices from your customers.

In order to apply for an LLC loan, there are a few things you’ll need.

       1. Official LLC documents

Have your official LLC registration, company name, and tax identification number ready when applying for LLC loans.

       2. Credit score

If your LLC doesn’t have a business credit score yet, bring your personal credit score to loan applications. Most loans require a score of 600 or higher.

       3. Transaction history

You’re more likely to get approved for an LLC loan if you can prove that your business is established and has a steady stream of revenue. Bring a history of purchases and invoices that reflect your company’s financial health. 

You may also need to provide collateral or have a cosigner present, depending on the type of loan and the amount needed.

Whether you have an established LLC or are just starting out, there are many attainable ways to receive funding through small business loans. Take a look at your financial history, credit score, and documentation, and consider applying for an LLC loan through your local bank, the SBA, or any number of online lenders. Just be sure to take into account interest rates, borrowing and repayment term lengths, state regulations, and the credibility of the institution you’re borrowing from.

Want to learn more about small business loans for LLC’s? Check out these related articles on Business.org.

Disclaimer

At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.